Starbucks Reports Record Second Quarter Fiscal 2013 ...

[Pages:14]Starbucks Reports Record Second Quarter Fiscal 2013 Results Continued Strong Comparable Store Sales Growth of 7% in the US and 6% Globally Revenues Increase 11% to a Q2 Record $3.6 Billion; Operating Income Rises 26%

Record Q2 EPS of $0.51 Includes $0.03 Non-Routine Gain Company Raises Full Year EPS Target

SEATTLE; April 25, 2013 ? Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal second quarter and 26-week fiscal year to date ended March 31, 2013. Fiscal Second Quarter 2013 Highlights:

? Total net revenues increased 11% to $3.6 billion ? Global comparable store sales grew 6%, driven by a 4% increase in traffic and a 2% increase in average ticket, marking

the 13th consecutive quarter of global comp growth greater than 5% ? Operating margin expanded 180 basis points to a Q2 record 15.3% ? Consolidated operating income grew 26% to $544 million ? Record Q2 EPS of $0.51 per share included a $0.03 non-routine gain on the sale of the company's equity in the joint

venture that operates Starbucks stores in Mexico; excluding this gain, EPS grew 20% ? Dollars loaded on Starbucks Cards through both new card activations and reloads increased 32% over Q2 FY12 ? Starbucks added 590 net new stores globally, including 337 Teavana stores ? The company has raised its full year earnings per share target range to $2.12 to $2.18 from the previous target range of

$2.06 to $2.15

"Starbucks record operating performance in Q2 continues to demonstrate the underlying strength and resilience of our expanding global business, and the increasing relevance of the Starbucks brand to consumers all around the world," said Howard Schultz, chairman, president and chief executive officer. "Innovation and an enhanced customer experience drove strong comp sales and revenue growth, while a laser focus on improving efficiency and controlling costs enabled us to deliver record margins and earnings. Starbucks has never been better positioned to achieve the aspirational goal we have set of becoming one of the world's most respected, admired and enduring brands."

"Record second quarter results once again illustrate the power of the Starbucks business and brand," commented Troy Alstead, chief financial officer. "Continued strength in our US operations, despite ongoing uncertainty in the macro environment, has fueled our performance and allows us to pursue long term strategic initiatives across our segments. Given our performance in the first half of the year and the considerable momentum in the business as we enter the second-half, we are raising our full year earnings growth target."

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Second Quarter Fiscal 2013 Summary

Comparable Store Sales(1)

Sales Growth

Quarter Ended Mar 31, 2013 Change in Transactions

Consolidated

6%

4%

Americas

6%

5%

EMEA

(2)%

(1)%

CAP

8%

4%

(1) Includes only Starbucks company-operated stores open 13 months or longer.

Change in Ticket 2% 2% 0% 3%

Operating Results

Quarter Ended

($ in millions, except per share amounts)

Mar 31, 2013

Apr 1, 2012

Net New Stores(1)

590

176

Revenues

$3,555.9

$3,195.9

Operating Income

$544.1

$430.4

Operating Margin

15.3%

13.5%

EPS

$0.51

(1) Includes 337 Teavana stores added in the second quarter of fiscal 2013.

$0.40

Change 414 11% 26%

180 bps 28%

Consolidated net revenues reached a Q2 record $3.6 billion in Q2 FY13, an increase of 11% over Q2 FY12. The increase was due to a 6% increase in global comparable store sales and incremental revenues from the opening of 1,448 net new stores over the past 12 months, including the addition of 337 Teavana stores.

Consolidated operating income increased 26% to a Q2 record $544.1 million, compared to $430.4 million for the same period a year ago. Operating margin expanded 180 basis points to 15.3% this quarter, compared to 13.5% in Q2 FY12. The margin increase was primarily driven by sales leverage and lower coffee costs.

Q2 Americas Segment Results

Quarter Ended

($ in millions)

Mar 31, 2013

Apr 1, 2012

Change

Net New Stores(1)

95

72

23

Revenues

$2,604.1

$2,374.7

10%

Operating Income

$549.7

$449.5

22%

Operating Margin

21.1%

18.9%

220 bps

(1) Americas store data has been adjusted to exclude Seattle's Best Coffee, Evolution Fresh and Tazo Retail, which are now reported within All Other Segments.

Net revenues for the Americas segment were $2.6 billion in Q2 FY13, an increase of 10% over Q2 FY12. The increase was primarily due to a 6% increase in comparable store sales, comprised of a 5% increase in the number of transactions and a 2% increase in average ticket. Also contributing to the net revenue increase was incremental revenues from 522 net new store openings over the past 12 months.

Operating income increased to $549.7 million in Q2 FY13, representing growth of 22% compared to $449.5 million for the same period a year ago. Operating margin expanded 220 basis points to 21.1% in Q2 FY13 driven by sales leverage and lower coffee costs.

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Q2 EMEA Segment Results

($ in millions) Net New Stores Revenues Operating Income Operating Margin

Quarter Ended

Mar 31, 2013

Apr 1, 2012

22

17

$273.2

$272.4

$5.2

($7.0)

1.9%

(2.6)%

Change 5 0% nm

450 bps

Net revenues for the EMEA segment were $273.2 million in Q2 FY13, flat to Q2 FY12. Revenue growth of 48% in licensed stores, driven by the opening of 117 net new stores in the last 12 months, was offset by a decline in company-operated revenue primarily driven by prior store portfolio optimization activities.

Operating income of $5.2 million in Q2 FY13 grew $12.2 million from an operating loss of $7.0 million in Q2 FY12. Operating margin increased 450 basis points to 1.9%. Margin expansion was primarily driven by a continued focus on cost management and a shift in our store portfolio to more licensed stores. Also contributing to the margin expansion was a reduction to the estimated asset retirement obligations of our store leases in the region.

Q2 China/Asia Pacific Segment Results

($ in millions) Net New Stores Revenues Operating Income Operating Margin

Quarter Ended

Mar 31, 2013

Apr 1, 2012

147

83

$213.6

$174.6

$68.3

$68.2

32.0%

39.1%

Change 64 22% 0%

(710) bps

Net revenues for the China/Asia Pacific segment were $213.6 million in Q2 FY13, an increase of 22% over Q2 FY12. The increase was primarily due to incremental revenues from 516 net new store openings over the past 12 months and an 8% increase in comparable store sales.

Operating income of $68.3 million in Q2 FY13 was flat to the prior-year quarter. Operating margin decreased 710 basis points to 32.0% this quarter compared to 39.1% in Q2 FY12. The margin contraction was primarily due to investment spending to support continued growth in China and a shift in the composition of our store portfolio from licensed to company-operated stores. Also contributing to the margin contraction was the absence this year of non-routine income included in income from equity investees in the prior year.

Q2 Channel Development Segment Results

($ in millions) Revenues Operating Income Operating Margin

Quarter Ended

Mar 31, 2013

Apr 1, 2012

$343.5

$321.5

$94.1

$79.5

27.4%

24.7%

Change 7% 18%

270 bps

Channel Development net revenues were $343.5 million in Q2 FY13, an increase of 7% over Q2 FY12, primarily driven by sales of Starbucks- and Tazo-branded K-Cup? packs.

Operating income grew 18% to $94.1 million in Q2 FY13 compared to $79.5 million for the same period a year ago. Operating margin increased 270 basis points to 27.4% in Q2 FY13 compared to 24.7% in the prior-year period. The margin expansion was primarily due to lower coffee costs.

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Segment Reporting Update

Beginning in Q2 FY13, we removed unallocated corporate expenses from Other. Other is now referred to as All Other Segments and includes Teavana, Seattle's Best Coffee, Evolution Fresh, Tazo Retail and Digital Ventures. Unallocated corporate operating expenses, which pertain primarily to corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment, are now a reconciling item between total segment operating results and consolidated financial results. While our consolidated results are not impacted, our historical segment financial information has been revised to be consistent with the current period presentation. A historical recast of results can be found on the Investor Relations page on .

Q2 All Other Segments Results

($ in millions) Net New Stores Revenues Operating loss

Quarter Ended

Mar 31, 2013

Apr 1, 2012

326 $121.5 ($4.1)

4 $52.7 ($6.7)

Change

322 131% (39)%

Net revenues for All Other Segments were $121.5 million in Q2 FY13, an increase of 131% over Q2 FY12, primarily driven by the addition of Teavana retail store sales in the current quarter.

Operating loss was $4.1 million in Q2 FY13 compared to a loss of $6.7 million for the same period a year ago. The $2.6 million improvement was primarily driven by the acquisition of Teavana in Q2 FY13.

Year to Date Financial Results

Comparable Store Sales(1)

Two Quarters Ended Mar 31, 2013

Sales Growth

Change in Transactions

Change in Ticket

Consolidated

6%

4%

2%

Americas

6%

4%

2%

EMEA

(1)%

0%

(2)%

CAP

9%

6%

3%

(1) Includes only Starbucks company-operated stores open 13 months or longer.

Operating Results

Two Quarters Ended

($ in millions, except per share amounts)

Mar 31, 2013

Apr 1, 2012

Net New Stores(1)

802

417

Revenues

$7,355.4

$6,631.8

Operating Income

$1,174.6

$986.4

Operating Margin

16.0%

14.9%

EPS

$1.08

$0.90

(1) Includes 337 Teavana stores added in the second quarter of fiscal 2013.

Change 385 11% 19%

110 bps 20%

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Fiscal 2013 Targets

Starbucks reaffirms the following fiscal 2013 targets:

? Revenue growth of approximately 10% - 13% ? Mid single digit global comparable store sales growth ? Full-year consolidated operating margin improvement of approximately 100 basis points over FY12 results ? Capital expenditures of approximately $1.2 billion for the full year

Starbucks has updated the following fiscal 2013 targets:

? The company plans to open approximately 1,650 net new stores globally, reiterating the previous target of 1,300 Starbucks stores and including 350 Teavana stores acquired and to be opened in the year

? Starbucks has raised its full year earnings per share target to a range of $2.12 - $2.18, consisting of $0.50 - $0.53 in Q3 and $0.54 - $0.57 in Q4

Company Updates

? Starbucks was recognized by Fortune magazine as the fifth "Most Admired Company" in the world and Ethisphere Magazine named Starbucks one of the World's Most Ethical Companies for the seventh year in a row.

? The company opened its first store in Vietnam on January 31, an iconic flagship location in Ho Chi Minh City. ? Starbucks? coffee K-cup? packs were recognized as the most successful CPG beverage product of 2012 by Information

Resources, Inc. (IRI), a leading market research company. ? As part of the ongoing evaluation of appropriate ownership structures in international markets, Starbucks sold its 18%

equity in Mexico to long time trusted business partner, Alsea, S.A.B. de C.V. ? Starbucks announced the expansion of its loyalty and rewards program with an industry-first innovation that will enable

customers to earn rewards for grocery channel purchases that can be redeemed in Starbucks retail stores. ? The company expanded its comprehensive ethical sourcing program with a new research and development center in Costa

Rica; the 240-hectare farm will be converted into a global agronomy center and is part of Starbucks commitment to ethically sourcing 100 percent of its coffee by 2015. ? Starbucks announced the appointment of two new members to its senior leadership team; Sharon Rothstein was named global chief marketing officer and Matthew Ryan will serve as global chief strategy officer. ? The Board of Directors declared a cash dividend of $0.21 per share, payable on May 24, 2013, to shareholders of record as of May 9, 2013. ? The company repurchased approximately 3 million shares of common stock in Q2 FY13; approximately 26 million shares remain available for purchase under previous authorizations.

Conference Call

Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman, president and ceo, Troy Alstead, cfo and Cliff Burrows, president, Americas. The call will be webcast and can be accessed at . A replay of the webcast will be available through approximately 5:00 p.m. Pacific Time on Friday, May 24, 2013. A replay of the call will also be available via telephone through 9:00 p.m. Pacific Time on Saturday, April 27, 2013 by calling 1-855-859-2056, reservation number 36849786.

The company's consolidated statements of earnings, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications. This information should be reviewed in conjunction with this press release. Please refer to the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2012 for additional information.

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About Starbucks

Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality arabica coffee in the world. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at .

Forward-Looking Statements

This release contains forward-looking statements relating to certain company initiatives, strategies and plans, as well as trends in or expectations regarding our diversified business model, the strength, health and potential of our business and brand, business momentum, growth and growth opportunities, earnings per share, revenues, operating margins, profits, capital expenditures, comparable store sales and store openings and closings. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to a number of significant risks and uncertainties. Actual future results may differ materially depending on a variety of factors including, but not limited to, coffee, dairy and other raw material prices and availability, costs associated with, and the successful execution of, the company's initiatives, strategies and plans, the acceptance of the company's products by our customers, fluctuations in U.S. and international economies and currencies, the impact of competition, the effect of legal proceedings, and other risks detailed in the company filings with the Securities and Exchange Commission, including the "Risk Factors" section of Starbucks Annual Report on Form 10-K for the fiscal year ended September 30, 2012. The company assumes no obligation to update any of these forward-looking statements.

Contacts:

Starbucks Contact, Investor Relations: JoAnn DeGrande / Greg Smith 206-318-7118 investorrelations@

Starbucks Contact, Media: Jim Olson 206-318-7100 press@

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STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited, in millions, except per share data)

Fiscal Year Ended

Mar 31, 2013

Quarter Ended

Apr 1, 2012

Net revenues: Company-operated stores Licensed stores CPG, foodservice and other

Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses

Total Operating Expenses Income from equity investees

Operating income Interest income and other, net Interest expense

Earnings before income taxes Income taxes Net earnings including noncontrolling interest Net earnings attributable to noncontrolling interest Net earnings attributable to Starbucks

$ 2,807.7 $ 2,521.2

322.1

290.3

426.1

384.4

3,555.9

3,195.9

1,530.4

1,411.9

1,038.4

956.5

112.1

105.3

153.1

137.1

230.3

206.9

3,064.3

2,817.7

52.5

52.2

544.1

430.4

50.8

35.3

(6.1)

(8.8)

588.8

456.9

198.1

146.8

390.7

310.1

0.3

0.2

$ 390.4 $ 309.9

Net earnings per common share - diluted Weighted avg. shares outstanding - diluted

$

0.51 $

0.40

761.3

773.3

Cash dividends declared per share

$

0.21 $

0.17

Supplemental Ratios:

Store operating expenses as a percentage of companyoperated stores revenue

Effective tax rate including noncontrolling interest

% Change

11.4% 11.0 10.8 11.3

8.4 8.6 6.5 11.7 11.3 8.8 0.6 26.4 43.9 (30.7) 28.9 34.9 26.0 50.0 26.0%

27.5%

Quarter Ended

Mar 31, 2013

Apr 1, 2012

As a % of total net revenues

79.0% 9.1

12.0 100.0

43.0 29.2

3.2 4.3 6.5 86.2 1.5 15.3 1.4 (0.2) 16.6 5.6 11.0 -- 11.0%

78.9% 9.1

12.0 100.0

44.2 29.9

3.3 4.3 6.5 88.2 1.6 13.5 1.1 (0.3) 14.3 4.6 9.7 -- 9.7%

37.0% 33.6%

37.9% 32.1%

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STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited, in millions, except per share data)

Fiscal Year Ended

Two Quarters Ended

Mar 31, 2013

Apr 1, 2012

Net revenues: Company-operated stores Licensed stores CPG, foodservice and other

Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses

Total Operating Expenses Income from equity investees

Operating income Interest income and other, net Interest expense

Earnings before income taxes Income taxes Net earnings including noncontrolling interest Net earnings attributable to noncontrolling interest Net earnings attributable to Starbucks

$ 5,797.3 $ 5,253.0

672.2

596.9

885.9

781.9

7,355.4

6,631.8

3,151.1

2,908.0

2,127.9

1,952.2

244.6

212

302.0

271.9

462.2

398.4

6,287.8

5,742.5

107.0

97.1

1,174.6

986.4

48.0

58.5

(12.7)

(17.4)

1,209.9

1,027.5

386.8

335.2

823.1

692.3

0.6

0.4

$ 822.5 $ 691.9

Net earnings per common share - diluted Weighted avg. shares outstanding - diluted

$

1.08 $

0.90

761.3

770.9

Cash dividends declared per share

$

0.42 $

0.34

Supplemental Ratios:

Store operating expenses as a percentage of companyoperated stores revenue

Effective tax rate including noncontrolling interest

% Change

10.4% 12.6 13.3 10.9

8.4 9.0 15.4 11.1 16.0 9.5 10.2 19.1 (17.9) (27.0) 17.8 15.4 18.9 50.0 18.9%

20.0%

Two Quarters Ended

Mar 31, 2013

Apr 1, 2012

As a % of total net revenues

78.8% 9.1

12.0 100.0

42.8 28.9

3.3 4.1 6.3 85.5 1.5 16.0 0.7 (0.2) 16.4 5.3 11.2 -- 11.2%

79.2% 9.0

11.8 100.0

43.8 29.4

3.2 4.1 6.0 86.6 1.5 14.9 0.9 (0.3) 15.5 5.1 10.4 -- 10.4%

36.7% 32.0%

37.2% 32.6%

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